In a recent post by Diligent, the company outlined some key details surrounding the International Sustainability Standards Board (ISSB).
Global stakeholders, including business leaders, international investors, and regulators, have long sought a consistent understanding of the impact of sustainability on a company’s outlook. This demand has been met by the International Sustainability Standards Board (ISSB), leading to the introduction of new global standards.
In June, the launch of the IFRS S1 and IFRS S2 standards, was met with worldwide applause from stock exchanges ranging from Lagos to London. These newly established regulations present a universal language for discussing sustainability and climate-related risks and opportunities. This development aids companies in communicating their sustainability narrative in a solid, verifiable fashion that can be equated across various organisations.
A considerable part of the new ISSB standards may seem recognisable as ISSB has made an effort to align various Environmental, Social, and Governance (ESG) standards, building one upon another. For instance, the Corporate Sustainability Reporting Directive (CSRD) and the Task Force for Climate-related Financial Disclosures (TCFD) both primarily focus on governance, strategy, risk management, and targets and metrics. Similarly, the SEC’s proposed climate disclosures also show comparable overlap, mandating detailed disclosures on risk management and strategy.
The ISSB’s aim to create a truly global framework led to the development of IFRS S1 and IFRS S2, based on the International Financial Reporting Standards (IFRS) framework for accounting, adopted by more than 140 jurisdictions. In terms of sustainability and climate, the IFRS accounting standards and ISSB sustainability standards include TCFD recommendations.
The introduction of these standards will require businesses to combine sustainability-related disclosures and financial statements in the same reporting package. Adapting to the new ESG framework or standard will likely involve additional tasks for businesses such as collecting new climate-related data and compiling them against new requirements. Particularly for auditors, the introduction of IFRS S1 and S2 translates to new deadlines, reporting processes, and compliance requirements.
Thankfully, companies will not face these new changes alone. The ISSB will establish a Transition Implementation Group to support efforts and provide resources to build reporting capacity. Additionally, they plan to collaborate with jurisdictions going beyond the global baseline to make reporting more efficient and effective, particularly by aligning ISSB and other standards.
Technology plays a vital role in making the journey smoother. Despite the significant work involved, technology can assist in integrating the ISSB standards into data collection processes, aligning these processes with other reporting frameworks, and managing complex content mapping and disclosure requirements. Moreover, specialised compliance and reporting software can facilitate customisation, integration, and adaptation, making it easier for departments to scale up.
As ISSB Chair Emmanuel Faber foretold, the publication is merely the beginning. He affirmed, “We know that better information leads to better economic decisions. Today’s publication is just the starting point as we consult on our future priorities, beyond climate.”
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